A U.S. Court of Appeals for the Second Circuit unanimously determined that Consolidated Edison, Inc. (ConEd) could not be sued by Northeast Utilities' shareholders for the $1.2 billion difference between the consideration that would have been paid upon consummation of the company's scuttled merger with Northeast Utilities and the market value of Northeast Utilities' common stock at the time of the merger agreement.
The court held that the shareholders of Northeast Utilities had no right to sue ConEd for its alleged breach of the parties' merger agreement dated Oct. 13, 1999. The court also reversed the March 21, 2003 opinion and order of the United States District Court for the Southern District of New York insofar as it denied ConEd's motion for summary judgment as to NU's claim for the shareholder premium arising out of such breach.
A federal district court in Manhattan in 2003 said it would allow lawsuits filed by Northeast Utilities and Consolidated ConEd against each other stemming from a failed merger attempt to move forward. Specifically, the court ruled that ConEd's claim for hundreds of millions of dollars against Northeast Utilities for breach of the October 1999 merger agreement, as well as ConEd's claim that Northeast Utilities underwent a material adverse change, would proceed to trial.
ConEd in March 2001 filed a lawsuit against Northeast Utilities for allegedly failing to satisfy conditions of the merger agreement. ConEd also asked the court to absolve it of any obligations it had to Northeast Utilities and asked the court to protect it from any damages sought by Northeast Utilities (see NGI, March 5, 2001).
That same month, Northeast Utilities responded by filing a breach-of-contract lawsuit against ConEd seeking damages of more than $1 billion, including the proposed premium in Con Edison's $26.70/share purchase offer.
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